Tuesday, November 12, 2013

After signing a release, can a beneficiary ask for passing of accounts?

If a beneficiary has signed a Release exonerating the executor, can he later apply to the court for a passing of accounts? In theory, no. In practice, the facts of the case make a difference. A reader recently wrote to me about a similar situation. His letter and my response are below:

"I held all of my late father's assets either jointly or as a designated beneficiary (House, bank accts, RRIF etc.). I am also the executor of his will. Very simply, everything was to be divided equally amongst my two brothers and myself. Which I did, and both brothers signed a Final Release of Executor. Now, two years later one of the brother's has applied to the Court for Orders for a Passing of Accounts and List of Assets. Can he ? It is my understanding there was no Estate so I didn't apply for probate."

You are correct that, strictly speaking, there was no estate for his will to govern because everything was held jointly or designated you as the beneficiary. However, we do now (since 2007) have rules that say that jointly held assets between a parent and child are legally supposed to be held in trust for the estate until it is determined whether they are truly joint assets.

Because of this, there was in fact an estate. All of the assets that were jointly held were in your father's estate. Theoretically, it should be a moot point because you divided those assets among the beneficiaries.

Obviously one of your brothers is wondering whether you did in fact divide the estate properly. I'm surprised that he went directly for a court passing of accounts rather than try to obtain an accounting from you first. Or perhaps he did, and that fact was simply not included in your question.

Normally a signed final Release indicates that the beneficiary approves of the executor's actions up to the date of the Release, and bars the beneficiary from taking further action against the executor. The Release must be based upon full disclosure by the executor, which comes in the form of an accounting. Otherwise, there is nothing for the beneficiaries to approve. Is it possible that you had them sign Releases without providing an accounting? If so, I think you will find it hard to rely on the signed Releases.

It could also be possible that the Releases they signed were dated, and that further assets were received or distributed after the date of the Release.

In your response to this application, make sure your accounting shows the payment of the taxes on the RRIF and on any other assets. Even if the RRIF designated a beneficiary, the taxes are paid from the estate. Often beneficiaries suspect money is missing simply because they don't realize how much of the estate is taken in taxes and probate fees. Don't take his application for an accounting personally if you can help it; very few executors get through their time as executor with their family popularity intact. It's just the nature of the job.

Lynne is the author of 10 books about estate planning, and one book about legal history.

Lynne is the editor of MC2, the national magazine of Mensa Canada.

Lynne is the co-host of The Law Show, a weekly program on VOCM radio.

Lynne is a Learning Group Facilitator (online instructor) for the Legal Research and Writing and the Written Advice and Advocacy modules of the Alberta Bar Admission course.

She is a member of the Law Society of Newfoundland and Labrador, the Law Society of Alberta, the Canadian Bar Association, STEP Canada, ADR Atlantic Institute, the Canadian Institute of Certified Executor Advisors, and Mensa Canada.

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